The government announced a policy on Wednesday that would force all federal departments and their portfolio agencies to justify their presence in Canberra and other capital cities, or else face a forced move to rural or regional Australia.

While Nationals leader Barnaby Joyce denied on Thursday that it would mean moving entire departments out of the capital, Ms Nash told the Newcastle Herald that the Hunter could benefit from the policy.

“Newcastle and [the] Hunter would absolutely be eligible for consideration under the Coalition government's decentralisation policy,” she said.

“People outside Sydney, Melbourne and Canberra deserve the benefits of government departments just as much as capital city people do.”

But Hunter MP Joel Fitzgibbon says the cost of the federal government’s proposal to send Canberra government agencies to regional Australia would most likely outweigh the benefits of having departments move to cities like Newcastle.

Citing the government’s controversial forced relocation of the Australian Pesticides And Veterinary Medicines Authority to Mr Joyce’s electorate of New England, Mr Fitzgibbon said the cost of the move – officially $26 million – was “a lot of roads and bridges that could be built in the Hunter”.

He said the proposal was a “thought bubble”.

“What is most important is that departments and public servants are in close proximity to politicians so that they can be effective,” he said.

“That’s the very model on which Canberra was built.”

He said Labor was “always happy to talk decentralisation when it made sense” and said the Hunter had benefited from having the tax office in Newcastle.

“Decentralisation can work and be beneficial where it’s well-planned, logical, and doesn’t undermine the capacity of an agency to do its job,” he said.